What s Wrong with Stop Sitting On Your Assets and MF101 And how the DOW case makes EH more viable

Transcription

1 What s Wrong with Stop Sitting On Your Assets and MF101 And how the DOW case makes EH more viable Copyright 2008 The Wealth Preservation Institute 3260 S. Lakeshore Dr.. St. Joseph, MI info@thewpi.org 1

2 Definition The WPI defines EH as follows: EH is removing equity from a personal residence or commercial property through refinancing (or an equity loan) where the money borrowed is placed in cash value life insurance. 2

3 Why do clients EH? 1) To build wealth in a tax-favorable manner. 2) To asset protect the equity of the home or commercial property. 3) Because a trusted advisor told the client to do it. 4) Because the client read a book on the subject that made the topic sound too good to be true. Generally speaking, clients who implement EH don t really understand the moving parts of the transaction. 3

4 We will focus on Wealth Building Most of you have read or heard about the books like Missed Fortune 101 and Stop Sitting on Your Assets. My opinion of the books is not favorable (they use fuzzy math and ignore the realities of the tax code). The books are driving a national craze on this topic along with IMOs, FMOs. There are special EH training seminars you can go to where you can pay a lot of money to learn fuzzy math and not learn the important tax code sections. 4

5 WWW-SSOYA and MF101 1) Fuzzy math. Both book use fuzzy math to make the concepts discussed look better. SSOYA uses math that is based on repositioning money borrowed from your home into what is called a "S.A.F.E.T.Y. Fund " where the money magically: a) grows tax free, mutual expense free and money management free; b) grows at market rates (S&P 500 index returns); and c) can be removed tax free in retirement. It sounds great, except there is NO SUCH INVESTMENT. 5

6 Tax-favored Growth The author is very clever to setup the reader so he/she doesn t know the "S.A.F.E.T.Y. Fund is really a cash value life insurance policy. On page 99 she discussed the "S.A.F.E.T.Y. Fund " and has an example where she shows $100,000 growing "tax-free" for 30 years. She compares this to money growing in a tax hostile account for a client in the 30% tax bracket. This is not reasonable unless all the gains come from taxable dividends or short term capital gains. In the example on page 99, the author states that IF $100,000 grows at 8% (net) annually, the client will have $931,727 in some magic tax free account vs. $485,572 in the tax hostile account. (The $931,727 number is actually incorrect as that is the balance after 29 years. The author must have looked at the row for year 29 in her spreadsheet as the correct number is 1,006,266). 6

7 THERE IS NO SUCH THING AS A MAGICAL S.A.F.E.T.Y. Fund The wealth building examples using the "S.A.F.E.T.Y. Fund " in SSOYA use a vehicle that grows 1) MONEY MANAGEMENT EXPENSE FREE, 2) MUTUAL EXPENSE FREE, 3) CAPITAL GAINS AND DIVIDEND TAX FREE, 4) INSURANCE EXPENSE FREE. The average mutual fund expense is over 1.2%, the average money management fee on a small brokerage account is 1% and taxes on investments range from 15% for long term capital gains to 40%+ for short term capital gains and dividend taxes (depending on the state you live in. 7

8 Cash Value Life Insurance (also known as the "S.A.F.E.T.Y. Fund ") Yes, it is true that money can grow tax-free and come out tax free in a cash value life (CVL) insurance policy. However, there are insurance loads, dac taxes, commission, etc. CVL can be a great wealth building tool, but money does not grow at a net number like the author says it does in her magic S.A.F.E.T.Y. Fund. 8

9 Another faulty example On page 106 the author has an example of $10,000 growing in a compound manner where after 30 years the balance is $100,628 vs. $34,000 with simple interest. At least with this example, the author looked at the correct row of her spreadsheet, but again, there is no magic wealth building tool that returns 8% without any expenses. 9

10 Another faulty example On page 142 of the book the author illustrates repositioning $90,000 of money a client has sitting as "idle equity" in a home and repositions that into the "S.A.F.E.T.Y. Fund " where that money grows at 7% annually. She states that the account balance in the "S.A.F.E.T.Y. Fund " at the end of 360 months would be $712,200. It s not certain where this number came from considering that by using annual compounding growth on $90,000 for 30 years the account balance should be $685,103. Again, it s not really relevant that $712,200 is more then $685,103 because neither number comes from the real world. The bottom line is that the author DOES NOT take into account any expenses in a life policy when giving readers her numbers as to how good her magic S.A.F.E.T.Y. Fund works to build wealth. 10

11 SSOYA ignores the realities of the Internal Revenue Code (IRC). Readers will unfortunately take from SSOYA that the interest on the loan when borrowing money from a personal residence to fund the "S.A.F.E.T.Y. Fund " is deductible. That is NOT TRUE the vast majority of the time (See 264(a)3). SSOYA is very clever in that nearly every example in the book has clients selling their home and using the proceeds from the sale to fund the "S.A.F.E.T.Y. Fund." Why? Because when you have home acquisition debt of a new home purchase, the interest on the debt is deductible up to $1,000,000 (with phase outs for high income clients). 11

12 Misleading example On page 75 there is an example of someone with a $10,000 mortgage payment who is in the 33% income tax bracket. SSOYA states on page 75 that the actual cost to the client is $6,667 due to the ability to deduct the interest. This example which does not specify whether the debt is home equity debt or home acquisition debt and its close proximity to the example on page 73, which is a home equity loan example, leads readers to believe the interest on home equity debt is deductible (when it is not under 264(a)3). 12

13 Flaws with IRA Rescue The tenor of this chapter is to tell readers that it is better to fund a S.A.F.E.T.Y. Fund rather than a taxdeferred retirement account (which it can be depending on the client) and incredibly, if you have money in such a plan, it is better for you financially to cash in such accounts and then fund with that money, you guessed it, a S.A.F.E.T.Y. Fund. The author suggests that readers should pull your funds out as quickly as possible from IRAs, 401(k), and 403(b) plans when reaching the age of 59 ½. 13

14 Continued 1) When you take your money out of an IRA or 401(k) plan it is immediately taxable. 2) If you take the money out as quickly as possible to fund a S.A.F.E.T.Y. Fund, two very bad things happen. a) When taking the money out in lump sum, most will move up their your personal income tax bracket (which will increase the taxes due on distributions). If you had $300,000 in an IRA and removed it all at once, even if you assumed your income that year was zero (which it won t be); nearly 50% of the money would be taxed at the 33% tax bracket. b) It make NO sense to lump sum fund a S.A.F.E.T.Y. Fund as the policy will be a MEC or will have an incredibly high DB to avoid being a MEC This chapter again illustrates the authors lack of knowledge about how to use cash value life insurance as a wealth building tool. 3) Using cash value life insurance (which is the author s S.A.F.E.T.Y. Fund ) for someone over the age of 60 and certainly over the age of 65 to build wealth is very difficult. The costs of insurance make this prohibitive for most and many are not healthy which compounds the problem. 14

15 Zero Rate of Return In Chapter 1 and several other places in SSOYA it is stated that Equity in your home earns you a "ZERO rate of return." Sales people use this phrase commonly to motivate clients to move forward with Equity Harvesting instead to grow their wealth. This statement is patently FALSE and MISLEADING. It is also FALSE to say that an appreciating home does not have compound growth. 15

16 Continued If you pay down the debt on a home, doing so does save you money (the interest expense) and does build your wealth. Paying down debt on a home might not work as well as Equity Harvesting, but it is absolutely false to say that paying down the debt on a home doesn t build wealth or creates a ZERO rate of return. If you pay down your home debt by $50,000 over a 10 year period, you will save the interest expense on every dollar of debt paid off over the first ten years and then on that $50,000 of debt every year after. If the interest rate on the loan is 7%, you will save $3,500 a year ever year thereafter. 16

17 Compounding the return While this is a simple rate of return (vs. compound); if you invested that saved money into a brokerage account or other wealth building tool, the returns would, in fact, compound. The $3,500 saved, if invested, could compound and every year thereafter you could invest $3,500 into this compounding fund. Therefore, not only does paying down debt on a home generate a rate of return and help a client build wealth, it can do so in a compounding manner. 17

18 Something Novel 1) Let s try something novel. 2) Let s learn the EH topic correctly. 3) Let s give clients full disclosure so they fully understand the concept and so agents don t get sued. Let s inform the client and still have the topic be very powerful, useful and profitable. 18

19 Considerations when implementing EH 1) The client must own a home with equity. 2) The client must be able to service the debt created with an equity removal. 3) The client must be healthy. 4) The life insurance policy used must be a good cash accumulator. 5) The client has no immediate need for the cash in the life policy* *Many times in books on this subject they make it sound like a client can fund a life policy and the next year or two access loans with no problem. Anyone who know life insurance knows that is not the case. 19

20 The Law There are certain code sections that govern how clients should deal with the financial aspects. We might be off base at the WPI, but we believe that ALL advisors should know these laws before selling EH to clients. Title 26 Section 163 Title 26 Section 264(a) 20

21 Section Home Acquisition Debt Home Acquisition Debt (HAD) is a mortgage taken out after October 13, 1987, to buy, build, or substantially improve a qualified home (a main or second home). The debt must be secured by that home. If the amount of the mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as HAD. The total amount you can treat as HAD at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). * 21

22 Section Home Equity Debt (HED) If a client takes out a loan for reasons other than to buy, build, or substantially improve a home, it may qualify as HED. In addition, debt incurred to buy, build, or substantially improve a home, to the extent it is more than the HAD limit may qualify as HED. HED is a mortgage taken out after October 13, 1987, that: Does not qualify as HAD or as grandfathered debt, and Is secured by your qualified home. 22

23 HED Limit There is a limit on the amount of debt that can be treated as HED. The total HED on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its Home Acquisition Debt and grandfathered debt. 23

24 Title 26 Section 264(a) Section 264. Certain amounts paid in connection with insurance contracts (a) General rule No deduction shall be allowed for (2) Any amount paid or accrued on indebtedness incurred or continued to purchase or carry a single premium life insurance, endowment, or annuity contract. (3) Except as provided in subsection (d), any amount paid or accrued on indebtedness incurred or continued to purchase or carry a life insurance, endowment, or annuity contract (other than a single premium contract or a contract treated as a single premium contract) pursuant to a plan of purchase which contemplates the systematic direct or indirect borrowing of part or all of the increases in the cash value of such contract (either from the insurer or otherwise). 24

25 264(a) Continued EH is based on the concept of removing equity from a home and repositioning it into life insurance (with the contemplation of borrowing). Then why does everyone say the interest on the refinance or home equity loan is deductible. Because the places the average advisor goes to get information on EH do not disclose or discuss 264(a). Only some even talk about the $100,000 debt limit on HED. 25

26 Continued That s right, the thousands of advisors out there telling people to borrow money from their homes to place in cash value for retirement purposes AND to write off the interest just opened themselves up to a lawsuit. 26

27 Ways to deal with 264(a) There are a handful of ways to deal with 264(a) The two that I d suggest you look at are: 1) Have the client can use other funds to purchase the life insurance and use the borrowed funds for other reasons. The client, before borrowing from the home, earmarks other funds which would be used to fund the life policy (using a SPIA is a good way to go). Then when the client borrows from the home, that money can be used for another other valid purpose so long as it does not go into a cash building life insurance policy with contemplation of borrowing. This is simple, but not everyone has an extra $100,000 in assets which can liquidated and used to pay insurance premiums. Therefore, your lower net worth client will not be a candidate to write off the interest on a $100,000 or less removal for EH purposes. 27

28 Dow Chemical One exception that s right in the Code comes from Title 26 Section 264(d)(1). The exception states that the general rule shall NOT apply if no part of 4 of the annual premiums due during the 7 seven years is paid under such a plan by means of indebtedness. In other words, if the client uses borrowed funds to pay premiums for years 1-3 and then uses nonborrowed funds to pay for premiums for years 4-7, 264(a)3 does not apply and that Code Section does not limit the interest on the loan 28

29 Practical application of Dow Assume a client wants to maximize the amount of borrowing from his/her home at least up to the 163 limit of $100,000 of new debt. In order to take advantage of the 4 out of 7 Rule, the client would pay a life insurance premium of $33, a year with borrowed funds during years1-3. Most of us (including me) would then think that, in order to take advantage of the 4 out of 7 Rule, the client would have to pay premiums of $33, in years 4-7 from non-borrowed funds. Again, 90% of our clients don t have that money and, therefore, will think they cannot use this exception to write off interest on the $100,000 of newly borrowed funds. 29

30 Continued What does that mean? It means that a client could use borrowed funds in some amount up to the $100,000 Section 163 limit to pay premiums in years 1-3 and then pay a much lower premium in years 4-7 with non-borrowed funds. In our example, the client may only allocate $10,000 a year in years 4-7 or even $5,000 a year (a number many clients will be able to come up with). 30

31 Financial viability of EH Example: Dr. Smith is 45 years old, is in good health, and earns $250,000 a year in W-2 take-home pay as a surgeon. His current house is worth $700,000 with $200,000 of debt on the home where the current interest rate on that loan is 6% on a 30-year conventional mortgage. Assume Dr. Smith has had the mortgage in place for 10 years. Assume Dr. Smith refinances his 200k debt and removes an additional $100,000 for EH (assume the client can posture things so the interest is deductible). 31

32 Continued If Dr. Smith repositioned 100k into an equity indexed life insurance policy over five years where the average rate of return pegged to the S&P 500 index is 7.5%, he could borrow income-tax free $30,470 from his policy from ages What is the annual cost to Dr. Smith to have this $100,000 of his money repositioned in the life policy? $6,000 annually as an interest expense (which in the 40% income-tax bracket really costs Dr. Smith $3,600 a year after taking the interest deduction on his tax return in the 40% combined tax bracket). 32

33 Continued Would he pay $3,600 a year to reposition $100,000 into a cash value life insurance policy? He should say yes. To compare apples to apples, Dr. Smith would have to invest $3,600 into a brokerage account every year he had the extra $100,000 debt on his home. Let s assume the brokerage account money grew at 7.5% annually less 20% for capital gains and dividend taxes, less.6% for mutual fund expenses (50% of the money is in mutual funds with a 1.2% expense). Let s assume there is NO money management fee from a money manager. 33

34 Continued How much could a client remove each year after-tax from the brokerage account from ages 66-85? $14,402 ($288,040 in after-tax income from ages 66-85) How much can the client borrow from the life insurance policy income-tax free each year from ages 66-85? $30,470 ($609,400 total tax-free income from ages 66-85) How much better did the client do using Equity Harvesting? $16,068 (each year for 20 years) or $331,360 better over the twenty-year retirement period. 34

35 Continued Wait, you say, this is not a fair comparison because there is still $100,000 of debt on the home? 1) Dr. Smith has a $125,041 debt benefit that will pay income-tax free from the life insurance policy if he were to die at age 84. If the client pays off the debt on the home from the death benefit, the client s after tax retirement income would be more than DOUBLE using EH vs. the do-nothing scenario. 2) Dr. Smith could choose to pay down the debt on the house using less than the last four year s loans from the life insurance policy. If you subtracted $100,000 (plus interest servicing the last four years) from the additional benefit of $331,360, the client would still be approximately $223,673 better off using Equity Harvesting (remember the client will have to service diminishing debt as he pays off the $100, from the loan which totals $7,687).

36 EH when the interest is NOT deductible The good thing about EH is that the concept is still viable if the interest is not deductible on the HED. Let s use the same example except assume the interest is not deductible. Dr. Smith will still be able to borrow out $30,470 tax-free from the life policy from ages Except now for the side fund comparison, Dr. Smith would be funding $6,000 (instead of $3,600). 36

37 Continued If Dr. Smith invested $6,000 into a brokerage account each year until age 65, he would be able to remove $24,003 each year from his brokerage account after-tax each year from ages How much better did Dr. Smith do by borrowing money and NOT writing off the interest? $6,044 annually or $120,880 better over the 20-year period. 37

38 Real World If you change the numbers to potentially make them more real world where the client also pays an.8% annual money-management fee (in addition to the annual blended capital gains/dividend tax and the 1.2% mutual fund expense on 50% of the portfolio (remember the variables from before)), then Dr. Smith would be able to remove $21,355 each year from his brokerage account after tax (which would mean that EH when the interest is not deductible generated $8,692 more per year in aftertax retirement income and $173,840 more over the 20- year retirement period). 38

39 Variable Loan Rate My illustration used what essentially is a wash loan. What if there was a 1% positive spread on the variable loan when borrowing from the policy? How much could the client borrow? $35,000 vs. $30,470 What if there is a 2% spread (what those in the industry think will happen)? $39,000 vs. $24,003 or $21,335 from the brokerage account when the interest is NOT deductible. This is the power of equity harvesting. 39

40 Continued You want to really make things real world? Explain to your clients that from , the S&P 500 returned over 12% while the average investor in the stock market earned less than 2.7%. EH using indexed life where the client s cash is protected from downturns in the stock market is going to help clients grow wealth in a taxfavorable manner, but also in a safe and less risky manner. 40

41 Summary on EH Simply put, EH is a nice way for many clients to grow wealth in a tax-favorable manner and a conservative manner whether the client writes of the interest or not. Advisors can grow their practices and help their clients using EH in a compliant and full disclosure manner. Remember, EH can work well whether a client is able to write off the interest or not. 41

42 Questions? You can learn how to implement an EH plan correctly by reading The Home Equity Management Guidebook: How to Achieve Maximum Wealth with Maximum Protection. 42

43 H.E.A.P. (Home Mortgage Acceleration Plan) Copyright 2008 he Wealth Preservation Institute

44 What Is H.E.A.P.? The Home equity Acceleration Plan is a dynamic new financial plan that enables you to pay off your home several years early. It does this WITHOUT changing your normal spending habits. It is NOT a bi-weekly payment plan or some other extra payment scheme YOU are completely in control of the whole plan. 44

45 What is H.E.A.P.? A very simple program advisors can use to show clients how to pay off their home mortgage 10+ years earlier thereby saving them the average client in excess of $100,000 in mortgage interest. Would such a topic be a good door opener to meet new clients? Absolutely. Then when you pick up the new client who wants H.E.A.P. you can then discuss life insurance, annuities, mortgages or other products or services you sell. H.E.A.P. in today s interest environment is the best door opening tool you have at your disposal. 45

46 Thing you need to know to understand why H.E.A.P. works 1) Interest on home mortgages is paid in arrears (we are paying for last month s interest expense). 2) Interest is charged daily on our home mortgage (not monthly like we pay) 3) Clients earn zero or close to zero with the money sitting in their checking account (and whatever is earned is taxable each year). 46

47 Who does H.E.A.P. work for? Clients who spend less then they make on an annual basis. If a client carries a checking account balance and spends less then they make, H.E.A.P. will reduce the length of a client s mortgage. The higher the average checking account balance and the more surplus a client has annually, the better H.E.A.P. works. Also, the client MUST have equity in the house in order to implement H.E.A.P. 47

48 How does H.E.A.P work 1) A client sets up a home equity line of credit (HELOC). 2) The HELOC is accessed and the borrowed funds are used to pay down the balance on the primary mortgage. 3) The HELOC then acts as the client s checking account (the client has his/her paychecks deposited into the HELOC and also writes checks from the HELOC). 4) When the client s surplus pays down the HELOC to zero, it is accessed again and the borrowed funds are again applied towards the primary mortgage. 48

49 Why H.E.A.P. works H.E.A.P. uses EVERY available dollar EVERY day to pay down home mortgage debt. Remember, money in a checking account earns a client zero (or close to it). By utilizing the HELOC and having the paycheck direct deposited into the HELOC, the client is ALWAYS PAYING DOWN MAXIMUM DEBT WITH EVERY AVAILABLE DOLLAR EVERY DAY. H.E.A.P. also works in good part because a client has surplus and can pay down the HELOC to zero every months. 49

50 Normal Principal Reduction Normal monthly payments gradually reduce the balance of the loan over the entire term. In this case, assuming $200,000 borrowed at 6.25% we have a monthly payment of $ The first payment pays $ towards principal and $1, towards interest. As the principal decreases slowly, the interest charges decrease as well. The 60 th payment of $1, applies only $ towards principal and $ towards interest. These payments continue until the loan is paid in full. $200, $100, $ Balanc e 50

51 Example Client Profile Monthly Income After Taxes = $5, First Mortgage Balance = $200,000 Mortgage Payment = $ Monthly Bills = $ Misc Monthly Expenses (spending $) $ Total Monthly Outlay = $2,

52 The Set Up -A line of credit is established of $25, A reserve amount is established of $15,000. -This reserve will be available credit at all time for emergency. In other words, this money will not be drawn out of account. -Equity Line is 8.25% with an interest only payment requirement. 52

53 The Plan Commences -$10,000 is immediately drawn and applied to the current first mortgage as a principal reduction. -$2, (paycheck) is direct deposited into the account twice a month from the employer. -$2, is withdrawn for bills and expenses on the first of the month. 53

54 Four Month Summary Date Activity Amount Balance Avail Credit st Mtg Reduction -$10,000 $10,000 $15, Payroll Deposit $2500 $ $ Payroll Deposit $2500 $ $ Bills -$ $ $ Payroll Deposit $2500 $ $ Payroll Deposit $2500 $ $ Bills -$ $ $ Payroll Deposit $2500 $ $ Payroll Deposit $2500 $ $ Bills -$ $ $ Payroll Deposit Payroll Deposit $2500 $2500 $ $ $ $

55 What Just Happened? The first mortgage was reduced by $10,000. $10,000 borrowed from line of credit was paid off within 4 months. NO spending habits were altered. $15,000 emergency fund was always maintained. It is understood that this type of client doesn t normally save the money being paid down each month on the HELOC. Usually the client will figure out a way to spend the some of the money useless and/or worthless items. The H.E.A.P. plan gives the client focus and should not alter the money they budget for needs and a specified amount of money for wants. 55

56 Repeat As Necessary Once HELOC balance reaches $0.00 another principal reduction can be made to first mortgage Although it only took four months to wipe out, in is understood that surprise expenses can arise 56

57 Do it Twice a Year If $20,000 is applied every year to our 30 year mortgage starting in the first year, it will be paid to $0.00 in SEVEN years. This is an interest savings of $189, AND spending habits assuming the client has some discipline were not altered. If the client wants or needs to spend more than budgeted, that s fine and the complete payoff of the primary mortgage will be somewhat delayed, but no matter what, the clients will pay off their mortgage significantly quicker than what they are doing now (which is nothing) or by using bi-weekly payments). 57

58 Charging for your services We recommend that advisors charge at least $500 for their services and we do not allow advisors to charge more then $1,000. Advisors also do not have to charge at all for the advice on H.E.A.P. if the goal is simply to use the topic as a value added topic to gather clients. Clients can be given access to the H.E.A.P. software so they can use it periodically to manage their plan. 58

59 Acceleration Plans to Stay away from Ones that require advisors to charge the client $3,500 for a software package. With H.E.A.P. we limit your maximum fee at $1,000 (and you don t have to charge a fee if you are just using the topic as a door opener). Plans that require the client to refinance their mortgage (especially into a 1 st position HELOC). There is NO need to refinance with H.E.A.P. The client simply adds on a small HELOC that is paid down ever 3-6 month. 59

60 Marketing/Summary One of the best things about the H.E.A.P. plan is how it can be used to help advisors market to new and existing clients. Think about it. Nearly every client has a mortgage. This program is virtually unknown at this time. If you can say with a straight face you know a way to help someone pay off their mortgage in as little as seven years, what are they going to say? No, they don t want to listen to you. Very simply put, H.E.A.P. is one of if not the best marketing tool you can use to differentiate yourself and gather new clients. 60

61 Questions? Go to Or 61

62 Overview for the Professional Designation: CWPP (Certified Wealth Preservation Planner) The Wealth Preservation Institute 3260 S. Lakeshore Dr. St. Joseph, MI

63 What do Advisors want? To earn more money? To have more knowledge than other advisors? To provide better advice to clients on multiple topics? To be more credible than other advisors? A team of advisors for support and back office when dealing with advanced planning. The ability to market to CPA, Attorneys and physicians through continuing education credit. Are these of interest to you? If so you are a candidate to become an CAPP or CWPP 63

64 The WPI and CWPP /CAPP What is the Wealth Preservation Institute (WPI)? The only educational entity in the country devoted to provide education on advanced planning (asset protection, tax and estate planning) The only entity in the country focusing on topics that apply mainly to the high income/net worth client. Certifying entity for the CWPP designation. The CWPP course is a 24 hour certification program which can be taken all online or in person. The Certified Asset Protection Planner designation is for those simply want to deal with AP (18 hours). 64

65 Are you should learn Asset Protection Why learn asset protection? 99% of your current and future clients are not asset protected. Most clients with wealth, once made aware of this fact, will want help. Once you learn the topic you can help. You are not talking product with a client and therefore will not be seen as pitching product. Of all the topics you would deal with, asset protection is best client gathering tool. 65

66 Topics What topics are covered in the CWPP course? Asset protection (3 hours) -Domestic -Offshore Deferred Compensation (4 hours) -WealthBuilder Annuity; Traditional NQDC and the Leveraged Bonus Plan -Qualified plans/412(i) plans ( carve-out planning) -ESOPs -IRAs Business Planning (6 hours) -Account Receivables (A/R) Leveraging (done the right way) -VEBAs and 419A(f)(6) Plans -Section 79 Plans -Closely Held Insurance Companies -Corporate Structure -International Tax Planning 66

67 Continued Estate Planning (8 hours) -Basic - Advanced - Life Insurance -Qualified Pension Insurance Partnership (Mitigating the 75% Tax Trap) -Charitable planning -Long Term Care Insurance Personal Finance (4 hours) -Annuities -Life Settlements -1% CFA Mortgages (Equity Harvesting the right way) -Reverse Mortgages -Private Annuity Trust 67

68 Marketing The WPI helps is certified advisors market in several very unique ways. 1) The ability to become an instant author through a 340+ page ghost book. The WPI will allow CWPP advisors to give CPE continuing education courses on a local level to CPAs and accountants. Ability to give CME seminars to physicians. 68

69 Continued The WPI has a number of articles that CWPP advisors can use to place in local medical, accounting, legal and other business journals. The WPI also has dozens of PowerPoint presentations CWPP or CAPP advisors can use to present topics to either client or other advisors. (what a time saver). 69

70 Marketing continued Ghost Web-Site for those who want a web-site which tells your clients about your special knowledge. E-newsletters The WPI creates for you to send out to your clients. E-newsletter blasting system so you can drip on your client s with Educational newsletters. This system is setup to track who opens your newsletters and how many times they open them. Can you imagine calling a client and telling them that you noticed they opened the last e-newsletter 5 times and you wondered if you could answer any questions for them. 70

71 Should you become a CWPP? YES. IF you are looking to learn several new topics which: can help high income/net worth clients; can help position you as the client s trusted advisor and team leader; are very insurance and annuity friendly. If you are looking to become better educated on topics you currently deal with. If you would like keep updated on law changes, new concepts and have access to PowerPoint presentations, articles and the ability to have your own Ghost book and ghost web-site and 71 blasting system.

72 How to sign up. If you would like to sign up to become a CWPP and/or CAPP advisor, you can do so by clicking on the appropriate tabs on the left front bottom part of the web-site under Product Categories You can take the course entirely online or in person. You can get started with a $500 deposit which will get you access to over 640 pages of CWPP course material and the tests. 72

73 Questions Please contact The WPI at or at 73

74 Overview of the Asset Protection Society The Asset Protection Society 191 N. Wacker Dr. Suite 2350 Chicago, IL

75 What is the APS The APS is a new kind of Society created to deal with the problems that plague clients and advisors on the topic of Asset Protection. The APS was created: 1) As an entity that issues "Ratings to advisors based on their knowledge and skill level so the public knows they are using advisors who actually know what they are doing when providing advice on asset protection (3 Rating Levels). 2) to assemble the highest caliber asset protection planners in the nation in a collaborative effort to "better the industry" and provide a forum for the exchange of ideas in a sometimes complicated, and always ever changing, field of asset protection. 75

76 Continued 3) to educate and train advisors to identify and implement the optimal asset protection planning structures for any client situation. 4) to educate the public on the topic of asset protection. 5) as a watch dog entity to warn the public and advisors who provide asset protection advice about the questionable asset protection plans in the marketplace. 76

77 Continued The APS was created to fill a void in the professional community when it comes to the topic of asset protection. The APS is here to turn the page to a new day where advisors can have a "go to" place where they learn the right "techniques" or confirm that techniques being used are "proper" for your clients. The public needs confidence in their advisors and until now there has been no way to instill confidence in that the advisor(s) they are using meets a standard of care when providing advice. 77

78 Continued It is the Founder s belief that advisors providing advice on the following topic must help their clients with asset protection planning Estate planning Financial planning Business planning Money management Insurance Planning Those advisors who do not are part of the problem that plagues clients when it comes to protecting their wealth. The Pitch of the APS is: Become a member and become part of the solution instead of being part of the problem. 78

79 Ratings AAA The AAA rating from the APS is the highest rating an advisor can obtain. This rating can only be given to attorneys who draft legal documents. A Level AAA rating means that an attorney has submitted for review to the APS education board the legal documents they use when forming legal structures for clients. AA The Level AA rating is for advisors of all kinds who know domestic asset protection planning, but do not draft legal documents that pertain to asset protection planning. A Level A rating is for advisors who have a basic knowledge on asset protection planning but can not provide complete advice to a client without a backup support team. G A G rating means the advisor knows other topics like life insurance, LTCI, annuities, etc. O An O rating means the advisor know offshore planning techniques. 79

80 Summary In our opinion the APS is going to have literally thousands of member in the next few years. The APS is going to receive national press and will be a place the pubic and advisors go to find an authoritative voice on the issues revolving around asset protection. Those that get involved will be able to belong to a unique Society which will help educate and keep advisors abreast of changes in the asset protection community. Those that get involved will be able better market themselves to client and advisors and can use the APS as a networking tool. Sign up now to become Part of the Solution. 80